January 28, 5:00 pm EST
This is a huge week. We’re following a down 9% month for stocks with a big bounceback. But it will all hinge on the events of the week.
We get Q4 earnings from about quarter of the companies in the S&P 500 – and a third of the Dow. We have the Fed on Wednesday. And the U.S. hosts trade talk meetings with China on Wednesday and Thursday. And then on Friday, we’ll get the jobs report.
We kicked off earnings season with reports from the big banks two weeks ago. And the reports broadly painted the picture of a healthy consumer and healthy economy.
This week, we hear from a broad swath of blue chips, including big multinational businesses. Among them: We heard from Caterpillar today. We’ll hear from Apple and Boeing tomorrow. McDonalds and 3M report on Wednesday. Amazon is on Thursday.
Expect a lot of discussions about “concerns” on the outlook (as we heard from Caterpillar today), but with a picture about Q4 that looked good (continuing with the theme of 2018).
Remember, much of the talk about slowdown has been about what might happen, in the year (or two) ahead – which primarily assumes a long-term stalemate on the Trump trade war. With that, never underestimate Wall Street and corporate America’s willingness to set the bar low (when given the opportunity), so that they can jump over a very low bar (i.e. set up for earnings beats in future quarters).
Far more important than those “concerns” voiced by CEO’s, is what the Fed has already done, and what will come out of the U.S./China talks this week.
Remember on January 4th, the Fed responded to the calamity in financial markets by backing down from their rate hiking plans. This week, the Fed Chair will likely use his post-meeting press conference to further massage markets. The Fed, the ECB and the BOJ have already positioned themselves (in recent weeks) to be the shock absorbers if the trade war continues to drag out.
As for trade talks, the calendar continues to approach the March 1 deadline on the tariff truce. And China has been gasping for air. I suspect we will get progress — maybe an official agreement on trade, leaving the intellectual property and technology transfer negotiations still on the table. That would be good progress.